 Felly, gweithio'r ffordd, welwch i'w ddod i'r Llywodraeth Cymraeg, mae'n fawr i'n gwneud i ddod i'r profesi António Campo yn ymddangos, ac i'r profesi Staflig Rhyffydd Jones. Felly, rwy'n ddod i'r llwyddiadau ymddangos ymddangos ymddangos ymddangos ymddangos, ac yn ymddangos ymddangos ymddangos, y gallwch yn yn iawn, i'r ffordd o'i'r rhaid i'r ffordd i chi'r ffordd o'r tyfu'r ffordd, felly ddod o'i'r ffordd o'i'r ffordd i chi'r ffordd o'i'r ffordd o'r tyfu'r ffordd. Ac, o ffwrdd, o'ch ddiwedd yn gweithio'r gionwyr yma, yw ddweud yma yw'r ysgol, i'r ddweud y ffordd o'u ddweud yma yw'r llwyddiad yma o'r pwysig yw'r ffordd o'i'r yn ysgolwll i'r ysgolwll yn ymgyrchol .. ..a holl dylunio llinol, ac mae'n iawn y ddau'r dros, .. ..a hynny'n ddweud o'r bwrdd o hynny byddai'n tynt yn ddefnyddio'r ysgolwll.. ..a Hose Antonio. Hose Antonio er fydd wedi'u isgolwll yn ysgolwll. Mae'r oedd yn unrhyw o'r llunio'r llunio'r ysgolwll.. ond y Pwg Ffgfyrdd i'r Ffgwrdd Cymru, a'r Cyfnodau Ynwysgwyl Ffgwrdd Cymru. Ond efallai mae'r cyfrifio'r cyfrifio. Mae'n cyfrifio'r cyfrifio'r cyfrifio ar gyfer y Llywodraeth Cymru, ac mae'n cyfrifio'r cyfrifio ar gyfer y Minister of Finance, Minister of Agriculture, a dyrector yng Nghymru Llywodraeth Cymru, ac mae'n cyfrifio'r cyfrifio ar gyfrifio'r Cyfrifio. He does not only bring in with him scholarly insights, but also insights from his work in the National Government. But even more, he also has a very distinguished career with the United Nations, serving as UN Undersecretary General for Economic and Social Affairs and also as executive director, a secretary of the UN commission for Latin America and the Caribbean. And so he has a truly internationalist perspective, which of course also resonates well with our work here at SOAS, because as you know SOAS works on the different regions of Africa, Asia, Middle East, but also dealing with global challenges. So I'm very, very delighted that Jose Antonio is here with us today to deliver this first SOAS central banking lecture and the plan is as follows. I will finish in a minute then Jose Antonio will deliver the lecture and then we'll have comments by Stephanie, who actually I should also introduce briefly, even though she doesn't really need introduction. So she's currently the financial market director at the initiative for policy dialogue at Columbia University and also she's worked as a professorial fellow at the IDS in Sussex. And I would have to spend another five minutes going through all her achievements so I'll not do that now, but I'll turn the floor to Jose Antonio and I'm looking very much forward to your lecture and your insights and then we'll have some comments from Stephanie and myself and then of course we'll open up and you're all welcome to share your views and ask questions. Thank you and let's all welcome Jose Antonio. Well, let me thank SOAS and Ulrich in particular for this invitation to deliver this lecture. This is part of a book which, as I showed later, is actually one of the greatest advantages that you can download freely, so it's a free book. But at the same time, let me say this is the result of many years of research that I do as I do a presenting introduction, which is quite very much like what Ulrich said. I had a context with the IMF in different characters. First of all, I was a Minister of Finance, so I was a governor of the fund, but I built a personal relation with some of the managing directors. But on top of that, when I was in the United Nations, I represented the United Nations in the International Monetary and Financial Committee, and then later on I was involved in at least two tasks that the IMF requested from me as chair of the group that evaluated the independent evaluation office of the IMF, which actually is a very interesting evaluation office, probably one of the best in the world. It produces really top analysis of IMF issues, and I was also a member of a group that analyzed the role of the special drone rights, which is a topic I'm very fond of. So this is the connection. Let me underscore perhaps one little thing about the book. I had as my dissertation advisor at Yale University, Carlos Diaz Alejandro. You may have some of you have heard of him. Anyway, he taught me that anything that you want to do analyzing economics has to be looked through the lens of history, so because he was also a very good economic historian. So I think one of the good things about my book is that every topic I analyze has a history, so be it the special drone rights or international monetary cooperation of capital account management issues, et cetera. So each one has the history behind what the IMF has today. Perhaps for that reason, because I'm very conscious of history, I actually chose the word non-system to refer to the international monetary non-system, which is, for those of you who know the history of this, it was a typical term used in the 1970s after the breakdown of the Bretton Woods arrangement, and the fact that after the failed negotiations to design a Bretton Woods II, let's say a second Bretton Woods, everyone referred to this as a non-system because everything that happened afterwards was ad hoc, let's say nobody designed it, and some of the actually some of the major developments were against the interests of some of the major players. For example, in floating exchange rates, floating exchange rate was not desired by any member country, neither the US nor the Europeans, but it ended up being one of the central features of the non-system that we have today. So I used the word non-system, which was a bit of a discussion with Oxford University Press when the book was being published because I said what the hell is this non in the title? Anyway, and of course being a developing country economist, there is a lot of emphasis in the book on developing country issues, so it's a bit of a perspective of the system from the view of the developing countries. So let me start by the four major issues of reform that I proposed in the book, which is the essence in a sense of the background of the book. The first one is the need to have a better global research system. The global research system of course refers to the international money, so we have a research system which is essentially dollar-based, with of course the euro and some other currencies including the British pound playing a secondary or tertiary role in the system. So the question is what were other trends to reform the system in a sense to create a system that is considered as more fair or favour, let's say, for all parties. The second is the issue of macroeconomic policy cooperation, which of course is strongly related to the issue of the exchange rate system, because the exchange rates are supposed to be, since Bretton was actually one of the adjusting mechanisms for global imbalances, let's say. The third is the issue of prevention and management of crisis, in which I deal with three different issues, the issue of capital account volatility and the four capital account management as an instrument of prevention, then with the issue of lending by the IMF or emergency lending is how I call it in the book. And the third is debt work-outs, how you resolve debt when they occur, whether you have an international system for international debt management. And finally, I discuss governance issues and I basically discuss three governance issues, what the apex organization of the system is, which today is the G20, in the past the G7, but the IMF had been created to be that institution. So I discussed that topic. The second is the issue of quota and votes in the IMF. And the third, which is in a sense my fun topic and one in which I actually came to know Ulrich Bals in the past, which is the issue of what I call the multi-layer architecture of the system. So aside from having a global organisation, regional and sub-regional organisations that are also part of the system. So let me refer to each of these topics briefly. So on the global research system, you can say there are two, I mean, the literature has discussed two approaches, which I increasingly see them as complementary, and actually nothing but complementarity can actually in my view work. The first is the multi-currency standard that theoretically was designed after the breakdown of the original Bretton Woods agreement in 1971. Now it doesn't work quite as such, basically because the other currencies are much less important than the US dollar in the system, but there is a potential competition and probably at least one country that is China wants its currency to become a really important part of the system. So I discuss the advantages and disadvantages of that. The advantages being that the flexibility of the exchange rates actually make the system much more resilient than the older systems, particularly the dollar goal system that was designed at Bretton Woods and that broke down in 1971. But at the same time it's equally inequitable than the current system in the sense that it will be the currencies of major countries that will be the international currencies, which means that most of countries of the world, including my own, will have no share in the system. So the second is actually a true international currency and the only true international currency today that we have are the special drawing rights of the International Monetary Fund. So that's why I put a lot of emphasis in that and the possibility of more actively using special drawing rights, which actually going to turn 50 next year. So I think they have an interesting role to play on particularly in one specific way, which is to use special drawing rights to finance IMF programs. So in a sense making the IMF a bit of a quasi central bank. I mean we all central banks create money by lending. That's the way money is created in the fiduciary system that we have today. So why the hell shouldn't we do the same with the IMF? I use the special drawing right, which is the money issued by the International Monetary Fund as an instrument. So I dedicated a lot to special drawing rights and I must say when I started to work on this a few years ago I was astonished to see that there was no research on the topic except the few periodic reports produced by the IMF itself. So what I would emphasize is that there is an interesting recent literature on this. Actually perhaps the large issuance of SDRs after the 2008 crisis in the London meeting of the GPO 20 in what was February or March 2008, 2009, that decided to do these big issuance of SDRs. It just led to a discussion again on the role of the SDRs. There have been several papers trying to estimate the possibility of using the SDRs more actively and the size of the issuance that can be done. Generally speaking something between $400 billion and $400 billion is something that the system can absorb basically because the annual accumulation of foreign exchange reserves in the world is larger than that. So this would be a fraction of that accumulation of foreign exchange reserves by the system. But the most important issue is to use SDRs as a mechanism of financing of IMF lending and you want to introduce some development link as it was called in the discussion of the 1960s when the issue of the creating the SDRs was being debated. I would think that the most important is probably to allocate or to include a criterion in the SDR allocation that will take into account the demand for reserves by countries, which means that developing countries should have a larger share in the allocations because they do have a larger demand for reserves. But I would say that that's probably a solution that will not be adopted. So for me the most important issue is actually how to use SDRs more actively, particularly as a source of lending by the IMF. In terms of the history of the allocations, this brief summary, you see the developing countries which are in the lower groups, middle income and low income countries, although they have an increase in sharing the allocations, since the first allocations of 1972, they still receive less than 40%, which is much less than their share in the world economy today. Actually there is a quite an active market for SDRs. I must be the only one who has studied this topic because so I studied the you know how a hood sells and buys SDRs and actually I was struck by the fact that many developed countries including the UK have actually used the SDRs but also the US actually at one point has also used their SDRs to you know as an instrument of payment. But of course most of the payments, I mean the most active users are developing countries are probably low income countries so and because they need more research but you see this is the amount of net drawings of the net use of SDRs by countries and basically in the middle of this graph it was actually about 50% of SDRs were actually used by countries but the big jump recently is because of the allocation of 2009, which has led of course to more active use of SDRs again by countries. On the macroeconomic operation and the exchange system the basic point that I make is that the G20, I'll talk a bit more about the G20 and the G7 before or the G10 before the G7 which was this group in OECD of major countries all these mechanisms of you know designing the cooperation of major countries do play an important role but they have basically two deficiencies. The first deficiency is that nobody elected them to do that they do that because they are more powerful so they are not in a sense a legitimate system every time I'm invited to a G20 meeting and I'm invited to a few of them I always say well this institution is not legitimate because my country is not a member. I never elected you to become to be the leaders of the world you know of course you are very important anyway but I didn't elect you. I contrasted with actually article 1.1 of the articles of agreement of the IMF which said as I said that the IMF was created to promote international monetary cooperation but as I said most cooperation takes place outside the IMF which is a topic that I came to call elite multilateralism so multilateralism of the elite countries that you know take you know then sell the responsibility for this. Now in that process the G20 actually created a very interesting process which I analyze extensively which is what is called the indicative the guidelines of the mutual assessment process and I think actually this is a starting point for a very interesting topic which in my view should be managed by the IMF itself through something like the idea that was created for global imbalances before the 2008 crisis which is basically a group of major economies in the IMF that are responsible for the whole membership of the IMF which I think will be a much better system actually also because the G20 has many economies that are not systemically relevant so you can actually discard about half of the members of the G20 for any interesting mechanism of microeconomic cooperation but what is important is that the members of that group should be selected you know through a bit at least some democratic process of a sort and that they respond to the whole membership of the IMF. I will not go into global imbalances as such which is the major issue that has to be discussed in the microeconomic cooperation except to say that and I discussed this extensively in the book that the global imbalances seem to reassert themselves once and again so every time you are apparently correcting some imbalances new imbalances show up in the system for example in the since the 2008 crisis we have seen a significant reduction in the in the Chinese surplus in the in the Japanese surplus but at the same time we have seen and this is a more interesting story and of course a huge reduction in the U.S deficit which is the bottom but at the same time we have seen new imbalances and I think the most important imbalance that I discussed in the book is the fact that this you see the red line that the European Union without the UK and without Germany the UK being the deficit country Germany being now the most surplus country in the world you know which actually turned from a fairly large deficit to a large surplus equivalent to about 1% of world GDP according to my estimates and someone had to absorb all these effects of the reduction of the U.S surplus or the U.S deficit and the turning around of the European Union's deficit into a surplus and who did that about China India China Japan on the one hand but also developing countries so the the blue line the light blue line are the developing countries without the oil economists and without China so that's why in a sense the you know if some countries reduce their their deficit or generate surpluses somebody in the elsewhere must be in the other direction and what happened is that you know aside from from China Japan developing countries also absorbed the increasing tension. Now on the on the exchange rate non-system I just called the history of of this arrangement and the idea that this is the most non-system of the non-system the strongest element because there is actually the decision to flow the exchange rates was totally unexpected actually was a de facto reality after the U.S broke the parity of the eliminated the convertibility of dollars into gold and what happened afterwards was that they tried to fix again the exchange rates and they were totally incapable of doing that and so the there was the decision in March 1973 just to float because it was a you know there was no alternative in a sense the European countries of course designed their own system of non-floating which so the Europe always maintained a kind of Britain was enrichment of a limited flexibility of the currencies because of the importance given to to to that in order to have deeper international trade within the European Union anyway and the other exception if we chose introducing to the IMF articles of agreement in 1976 is that the only condition so the countries were free to choose whatever exchange rate they choose so so long as they don't quote unquote manipulate the exchanges but the only problem is that that manipulation has never been defined uh so this the element in the system that has not been defined and there is always this discussion in Europe in the U.S. in particular whether the U.S. is going to call a country which means China in particular as a country that is manipulating the exchange rate although sometimes in relation to Germany they have come closer in recent months to also accuse the Europe the euro area of manipulating the exchange rate anyway so the the and the problem is that this system or this non-system as it is doesn't really contribute to correcting the correcting the global imbalances which show up once and again so in that regard I go for for an alternative that was discussed extensively again in the 1970s and has come back once and again for example in the works of John Williamson which is a major analyst of these issues which is basically having some indicative of target zones for exchange rates and actually when you look at the at the at the indicative lines of the mutual assessment process the g20 you can actually choose the indicators because they have already among those indicators so I said well why don't you stay though we take those indicators as the the clue to understand what is the role of macro economic cooperation okay on phrase on crisis prevention and resolution as I said I discussed the three issues the first one is is capital account management I have always refused to use controls at the word because I think it is it's one of those uses of the language which has a negative connotation so for for financial regulation nobody uses financial controls right but when you manage capital account issues you always use controls capital controls and so there is a bit of negative connotations in the term so I for a long time I have used the word regulations and some other people use the word management which is actually the word used by the IMF itself although the word controls is actually in the articles of agreement but anyway whatever term you use the basic point that I make in the book and this is probably a topic the specific topic that I have done more more most work on throughout the years is that you know the regulation of capital flows does make sense from the point of view of macroeconomic management and I would say for at least two different reasons first of all because it does give countries more autonomy to manage their macroeconomic policies which is why they were introduced in the and the IMF articles of agreement by the by the architects of the of the agreement and of course John Maynard Keynes was one of the strongest advocates of that point of view but the second is now you take this issue to out to the present that when you have a world economy that generates very different trends in the different parts of the economy you may want to have countries with very low interest rates and some countries with a higher interest rate this is the world we have lived with in the last 10 years you know developed countries which were in a bit of a mess after the crisis have maintained a very low interest rate zero or negative but at the same time the developing countries could not handle that because they did not have a as a stronger crisis at the developed countries so they want to have you know a positive interest rate for sure and sometimes a relatively high positive rate so in that system the only way to make the system coherent is to allow different trajectories for the monetary policy of different countries and that is very difficult as one of your professors I've learned that is one of your professor Helen Ray has actually pointed out that there is actually probably with the amount of capital mobility that we have today there is actually no way to dissociate yourself from the trends in international interest rates which means basically to dissociate yourself from the US monetary policy so the this is of course a very important issue and I said capital commas should be an inherent part of macroeconomic management because of that capacity and probably it will be better at the IMF setting in when it discuss the institutional the institutional view of the IMF on this topic which was discussed in 2012 is that not only should we allow capital account management but actually we should have more cooperation to manage it and probably by the major source countries let's say by the way when I was finance minister I represented my country I was actually we were in the discussion led by Michelle Kandesu as my imagine director of the IMF to introduce capital account convertibility in the IMF articles of agreement which is basically to eliminate the possibility of using capital account management and all developing countries were against that idea and I actually was selected to talk in the name of Latin America against the view that fortunately we defeated okay now in terms of crisis resolution they said in the book a discussion of a of the history of the different arrangements and and I said in the reform of 2009-2010 it was probably most ambitious reform of credit lines in history they included the the doubling of all facilities the the creation of a of a contingency facility the flexible credit line which very few countries have used but actually my country is one of those countries that have used it so it's a flexible it's a kind of contingency line that you get and you use you need it otherwise you just leave the money in the in the hands of the IMF and facility and particularly there were more flexible facilities also for low income countries but on top of that it has been also a history of of conditionality which you know without going very far a conditionality was clearly strengthened in the 1970s and notably in the 1980s and 90s with the Latin American debt prices but also most probably most even more importantly by the the collapse of communism in Europe which led all these countries former communist countries come to the to the IMF for I mean becoming IMF members and then asking for resources from the IMF and then conditionality peak all sorts of extracial conditionality was introduced much worse than the one Latin America had experienced in 1980s now when this east Asian crisis struck in 1997 at the IMF came with this very tough conditionality there was a rebellion I mean to put it frankly of members are led by actually for the east Asian countries and the result of that was a most very interesting discussion of the role of IMF conditionality which actually was very positive and there was a decision in 2002 on IMF conditionality which basically established the point that it has to be macro relevant so you may want to have free trade you may want to have privatisation I mean the IMF but you know those are not supposed to be conditions in IMF lending okay so that was a very major step forward in the sense macro relevant conditionality had been the history of the IMF before the 1970s okay so this was returning to the old form of conditionality and there was a further advance in 2009 with the elimination of what are called the structural benchmarks that means if there is a structural conditionality and you break it that cannot lead to a suspension in the in the disbursement of the funds that have been approved by the IMF okay so in in in those regards we are today and this by the way there is a recent report of the independent evaluation office updating a previous report on conditionality and will they show that actually there has been a quite a significant advance in terms of reducing IMF conditionality but in case IMF conditionality is still seen as a major obstacle to borrow from the IMF particularly by the Asian country they really do not want to go back to the IMF after the experience of the late 1990s just this is just a a brief history of the of the lending the and the peaks this is a as a proportion of world GDP the the the light blue lines are developed countries interestingly the first decades the developed countries were very active borrowers from the IMF and in mice I have a table that has the major borrowers you know every five years or every 10 years every decade and surprise surprise the UK was one okay it was a major borough from the IMF the other actually major borough was India so the UK and India were by far the most important borrowers but France was also important borough and from the IMF Germany had at one point alone Japan did although Japan became a late member etc etc so major developed countries were actually quite active users of the IMF but that stopped altogether after the the last peak that you see there was the after the first oil shock but after that the basically developed countries ceased to be borrowers from the IMF and everything is dominated by the by the by the black line which are developing and emerging economies okay now in the recent crisis what is interesting is that developed countries came back you know with the case of let's say Ireland Portugal Greece Iceland which became again borrowers from the IMF and so there is actually a more interesting balance this is very important because the IMF was never supposed to be a north south institution like the world bank was supposed to was the sign so the world bank was supposed to lend only to developing countries the IMF was was a true cooperative let's say in that sense that all countries could borrow from it and some developers have always been important borrowers and the third issue that I discussed so in this actually my point is in terms of lending lines the emergency financing we probably have the one of the best systems in history today you know with the major problem is that many countries including the Asian countries refuse to borrow from the IMF so there's a stigma associated to borrowing from the IMF which is the topic the term used in the literature and and that can only be solved by by you know more flexible lines of different sort and in my view the the best would be actually something like a swap credit line which is actually the system that is used by developed by developed countries actually discussing the in my chapter of macro cooperation the role of the US Fed credit lines okay the swap credit lines and I show that they are much more important than IMF actually they after 2008 they they reached a peak that was about four times the size of IMF lending so something like that is what should be developed for developing countries also but the third topic is that the depth crisis resolution and the basic topic here that we don't have institutions to manage this problem and it was a topic that had been discussed once and again with two views the market view which is the one that has prevailed including in the most recent decision of 2014 after the big Argentinian depth crisis with some decisions by US courts against Argentina which basically led to a decision to facilitate let's say the market negotiations of when you have a debt problems and the others was to create a very institutional mechanism for depth resolution and the most important attempt was actually led by the IMF through the sovereign debt reconstruction mechanism between 2002 and 2004 that is after the east Asian crisis and there was I think the initial proposals were not started but the last proposals after the discussion of the two years I think were a beginning of something that can be acceptable and actually I come in favour of something like that in my book so the what is the of the essence of this is first of all that whatever depth resolution power the IMF has has to be totally independent from the IMF board so it has to be more like what we have in the WTO in which that resolution I mean trade dispute resolution is in the hands of a totally autonomous body which is independent from the board and that basically well you know the idea that I think the you could of course create the depth resolution mechanism in the United Nations but that will be creating a new institution that will be totally unacceptable for some countries that's why I think trying to build something in the IMF is probably the best finally on the governance of the system I discuss three issues the voice and representation of developing countries in the IMF in the Bretton was in general a representative apex organisation instead of the lead multilateralism that we have in place and finally a denser multilayer architecture on the quote and voting power the major mechanism is the over representation of Euro on the oppression of Asia and of course there's an agreement that also must be elected but this is a kind of fictitious agreement because some countries have the possibility of electing themselves so you have your country that you know that will be on the table anyway which is okay and there are other institutional issues I will stand particularly by the third but the proper function of the constituency system is very important the constituencies are the groupings of countries that cannot elect themselves like my own so you have a constituency and the problem is how to make you know constituencies work better in my experience working with some of those constituencies for example the Canadian constituency which includes the Caribbean countries is a very well-functioning constituency but there are other constituencies which are actually not homogeneous and interviews on different topics and of course the competitive merit based election of the IMF managing director of the World Bank press is a I can't you know I was at one point candid for the World Bank press so I know this is this is important and we are very far from that anyway and this is the last reform there is a of the IMF quotas and voting power let me underscore one point but let me underscore that we are in another discussion again of this topic so this topic was launched again as a topic discussion last year so we're actually in the midst of a new reform of this topic as you can see have developing developed countries on the left and developing countries on the right when it's clear that the developed countries did give a bit less than 4% of the quota actually the what I call the European G10 which is one way of collecting the most important members of the European members are lost a bit more than 4% and that of course was was won by developed countries developing countries excuse me but there are a few developing countries that accumulated all of that additional quota which means China, India, Brazil, Mexico and Korea which is still included in that list of developing countries anyway actually you see that many of the developing countries actually lost so that negative 3.4 is other developing countries that lost in the quota location including at the end the low income countries so the the the vote reform was a bit better and this is because the the basic votes were increased and the basic votes are they they say the one country one votes system of the in the IMF the UN is of course one country one vote but in the IMF is one dollar one vote right so but the so this mix in the IMF actually between the two and in this reform the the weight of the of the basic votes was increased and this is very important for small countries and for poor countries small poor countries are really bad in the one dollar one vote system and as you can see the in in this the the loss of developed countries was higher and now the rest of developing countries lost much less but particularly the low income countries actually won a bit in terms of voting power so the so that's why in any reform of the voting power in the IMF I think this role of the basic votes is quite quite important today the second is the apex representation I have an analysis basically with something that we did with Joe Stiglis on the on this the G20 on my elite multilateralism saying that that it was very effective in showing leadership and and some proposals for reform in the early part of the crisis but but later the effectiveness has been quite limited and and there is this issue that that it has a very peculiar capacity to to self-select new topics so the accumulation of topics in in the G20 has increased through time and you can see and there are some very good Canadian analysis of the of what this topic means and they essentially mean very little so it will be better to concentrate again on the core issues which is developing the early phase of this crisis actually the London meeting of the of the G20 was by far the best in terms of decisions and effectiveness they say of the G20 after that there was a clear deterioration in the effectiveness but of course the most negative is that as I said there is a self-appointed ad hoc body with problems of representation so it doesn't represent myself and as a member as a Colombian citizen and Colombia has no seat on the table we are not represented so for me this is not legitimate if I cannot have a voice in the selection of the members anyway so and so the you can say there are two proposals you can design but the we come I come in favour of course of the proposal of the Stiglis Commission of 2009 which is actually to create what we call a global I was a member of that commission so I actually more or less wrote this part of the proposal which is what is called the global economic coordination council which is part of which will be part of the UN system and not the UN organization this difference for for those of us who are working in the United Nations I work for 10 years is a very important difference so the the UN system includes actually the IMF and the World Bank and so it's a it's a broader set of organizations the UN organization is the little part of this of the smaller part of the system that is directly controlled by the General Assembly let's say of the United Nations that is basically you know the the secretariat as it is called the of the IMF plus a few organizations that are directly dependent on the on the secretariat including let's say UNCTAD or UNICEF or UNDP let's say but most of the specialized organizations are not part of that little body of the UN organization but the UN system so our proposal is something like a body that would be for the UN system and of course with the participation of all countries who will elect the members actually through a weighted boat system so something more similar to the World Bank and the IMF way of naming members than the UN organization which really elects on the basis of one country one boat right so that's the the proposal but you can think of the other alternative which is give the more power to the IMF and have those smaller groups of countries within the IMF selected of you know the major economies but responding to the whole IMF membership and finally my proposal of a multi-layer architecture so I the basic issue here is that that for smaller countries and particularly for developing countries it is actually better to to have aside from the IMF some regional and sub regional organizations in which you have a stronger voice so so representation is actually enhanced in a very unequal world by having different layers of organizations and that's why I think the multi-layer architecture is much better and actually I use in the book the architecture actually of the system of multilateral development banks because that's a multi-layer architecture so what I want is to have to see how we reproduce in the international monetary system what we have developed for developed banks and just this is an estimate for one year that I did this is actually quite a complex estimation of how the different parts of the multilateral development banking system serve different parts of the world economy I had in red the well in blue is the world bank in red the the regional banks and in green the sub regional and inter regional banks I mean regional banks actually we have had for sometimes one which is Islamic Development Bank but we have now two more the the new development bank from the BRICS country and the Asian Infrastructure Investment Bank which I thought was going to be a regional bank but it's now throughout the world trying to find members so it's actually wants to be an inter regional bank whatever the this is the share of the system and what is very interesting actually here first of all is the Middle East is the best part of the of the system but then you have many other regions in which you have a significant service from the multilateral development banks from different combinations Europe for example is basically served by the European Investment Bank but you see for example Sub-Saharan Africa is basically the world bank and if you see Latin America it's actually the regional development banks so it's a it's a very interesting story and the smallest aside from the US which I don't have here in my table because it's more or less irrelevant in terms of service of multilateral development banks although they do have one little multilateral bank which is the North American Development Bank which basically service Mexico but the smaller one is actually East Asia and the Pacific basically East Asia and that's why I think the Chinese are right that they have to increase the size of that bar that the bar is too little and and that's why the Chinese have been at the center of many of the proposal so this is a my proposal for a multilateral architecture my comparison here is with the with the international monetary system which you basically have an empty space in many parts of the world actually the european stability mechanism being the most important followed by the xiama initiative you know being the two most important actually I will end with this comment you don't have to have a very large monetary institution of a real also real level to have a good service and actually I discussed in the in the book one example that is a very successful institution from my part of the work which is the Latin American Reserve Fund which was created as an Indian Reserve Fund that then allowed new members from Latin America and that has been a very successful institution it has actually facilitated money to to all members and interestingly although it's very little this one it's very little it actually has lent to our country more than the IMF so you don't have to have huge institutions but you know very functional institution that plays that role well thank you very much this book which is called resetting international monetary non-system is actually freely available for downloading both from Oxford University Press but I have here the the ones who pay for the free loading of the book which was the United Nations University Wider Institute so you can also get into United Nations University Wider and also you'll find a book to download so it's a freely available book I hope several of you will go through it and I think it's I think it's a nice book thank you thank you so much Jose Antonio for this really sort-provoking highly interesting and highly relevant speech and I have actually I don't have an awful lot of time to read books but I did read this one and it really is worth reading and it's blending history with the current problems and it's not only analysing the problem but really putting forward some very sensible solutions I believe so we'll give Jose Antonio a little time to to recoup his breath and I'd like to ask Stephanie to deliver her comments before I will add some as well and so Stephanie has also a worse of experience on on the issues Jose Antonio covered she's worked actually very closely with Jose Antonio also with Joe Stiglids at Columbia University so we're very lucky to have her to share her insights Stephanie thank you very much Uli for your kind introduction and also for organising this important event I'm really delighted to be a commentator of this book which which really is excellent and which I can very warmly recommend I think all of Jose Antonio's work is is very good but this one is really really outstanding so I really recommend you to read it and I think as Uli already said one of the things that is very attractive is is that in every one of the chapters you start with the history usually going back to Bretton Woods then you then Jose Antonio brings out the key dilemmas or issues and thirdly he proposes policy and I think it's quite a rare mixture which works extremely well and I think and the other thing that I think is very positive is that the book is is quite radical because obviously we need a radical reform of the international monetary non-system as he calls it but on the other hand it's also in some ways quite moderate so that it's on the limit of where you could actually imagine that the political well could be mustered hopefully by the major countries to actually do these reforms so I think that is a good trick for proposing potentially successful reforms so I think that this lack of a proper international monetary system is one of the key weaknesses of the international economy combined with the lack of a proper international financial system I think which we've done a lot of work on with with Jose Antonio and I want to just initially make a general point that for example what Trump is proposing is to restrict trade and to deregulate finance including international finance and this is exactly the wrong solution because the evidence is quite strong that international trade has net benefits although of course it has major issues of redistribution particularly within countries so there needs to be some some change of that but in terms of finance the net benefit the net effects on countries and on the world economy is often negative and we've had of course a lot of evidence from that and also theoretical so it's exactly the wrong thing that that the current US president is focusing on and what the world needs is to focus on how to fix this deeply dysfunctional monetary and financial system and just to improve a bit the operations of trade mainly I think through measures at national or regional levels so I think that's a very important point to make um I think uh one of the key things that comes came out clearly to me after reading this book is that if we look at the international monetary and financial system as a whole there are these negative interactions between a number of factors and some of which have already been of course discussed by Jose Antonio the first is the asymmetric adjustment of surplus and deficit countries uh which is has highly problematic effects on growth employment investment and poverty reduction this is of course an old problem which Keynes tried to address at Bretton Woods and he tried to fix it in fact the IMF has a scarce currency clause that should be applied to surplus countries but it's never been involved uh now this problem has in some ways got worse in Europe because after the the so-called global financial crisis which we call the North Atlantic financial crisis because this is where it happened it's um in the eurozone um there emerged this deeper symmetry between the way in which surplus and deficit countries had to adjust there was intense pressure on the deficit countries particularly those that were in the middle of the crisis uh like Greece Portugal Spain and Ireland but also uh on Italy which it wasn't in crisis but has a high level of debt to adjust and adjust in a major way downwards very very draconian adjustment and there was no successful pressure on Germany and Holland which have bad bad surfaces and I think this is a course of it was very bad for the European economy and it has been also very bad for the rest of the world including the developing world because it has imposed a deflationary bias into the world economy and into the the eurozone and I think one reason why I think is very worrying from the perspective of thinking about reform of the system that the eurozone is a rather integrated um politically integrated and economic integrated region a lot of people in this country think it's too integrated I think it's not enough integrated but even this very integrated group of countries having this european commission having the IMF involved is not able really to put pressure and uh change the mind of the policy makers in Germany and in Holland to adjust to expand because they have all this fiscal space they have space to increase wages and so on so I think this asymmetry of adjustment is deeply troubling how if we can't do it within the eurozone how can it be done internationally um I mean there are for example rules the european commission has a rule that any country that has a fiscal that has a current account surplus bigger than six percent should adjust by expansion or if not pay a fine but it hasn't been involved because Germany has had a current account surplus of eight percent of GDP for the last I don't know 10 years Holland has had for 10 percent and nothing has happened to them the commission hardly says anything so this is a major problem and a very costly problem if we think of countries like Greece where GDP fell by over 25 percent so this is this lack of of symmetry in the adjustment process and this bias towards deflation is a major problem and of course the developing countries in this case and the emerging economies are bystanders who suffer from this the second problem is the large spillovers of macroeconomic policies in developed countries and particularly I've talked about fiscal before but now I'm talking particularly about monetary policy and especially about monetary policy in the United States which by having the US dollar as main currency system has a major impact on the rest of the world this has always been the case and you know we have the work of people like Galwyr and Reinhard and others who showed the importance of US monetary policy to determining capital flows but it's become even more dramatic since since the 2007 crisis because of the large scale of quantitative easing as you know the US but also the eurozone the UK Japan have have started a massive program of monetary easing which led a company of course by very low interest rates and has cost Antonio said even zero or even negative interest rates if you want to buy a German government bond even today 10 years after the crisis you will get a negative yield in real terms even in nominal terms or almost yeah but so people in the developed countries didn't know where to put their savings so they discovered rediscovered emerging and developing countries including sub-Saharan Africa and there have been these massive capital flows to emerging economies and developing countries which of course strengthened their currencies excessively led to very large current account deficits as as the graph showed and led to very large levels of debt so there are very large spillovers from the effects of fiscal policies and monetary policies in the developed countries on emerging economies and on developing countries so they are affected by that but they have no influence in how these policies are determined and furthermore the policy makers in the developed countries have a domestic mandate the mandate of the US Fed is to ensure employment and and price stability um and I just learned from Jose Antonio a very long term interest rates in the United States and they're not supposed to look at the impact that their monetary policy has on the rest of the world I mean this is fine if you're Ghana because your monetary policy will not have major effects on the rest of the world but if you're the US or you're the eurozone or japan what you do has a major impact on the rest of the world and there is no mechanism at present on how to uh how to have influence of the rest of the world on on these policies I mean the IMF sometimes is actually writing good reports arguing for correction of policies but you know it has no impact the US does what it likes germany does what it likes so this is a key problem of how we enforce change within the existing powers the third issue which is studied by Jose Antonio and and which we have studied a lot in the past is the deeply dysfunctional private international financial system both domestically and internationally and this is a system which is the private finance is riddled with market imperfections and market failures of which perhaps the biggest one is the boom bus tendency of private markets which is accelerated of course by the dramatic deregulation that occurred in the time of the so-called Washington consensus and the dramatic rise of the scale of the financial sector globally and nationally the increase of its complexity and the opaqueness of the institutions and some of the some of the most critical mechanisms in fact it's called shadow banking meaning that it's a part of the banking system which is not really regulate and this of course leads also to boom busts in capital flows domestically domestic credit creation but also in terms of capital flows which has been so damaging to the developing and the emerging economies I mean capital inflows do have uh some beneficial effects but of course particularly when the short-term they have also very damaging effects but even in terms of the so-called very beneficial flows like foreign direct investment I've recently done some empirical work with victim marinda and other colleagues and we found to our surprise that in capital flows to Africa most of them including fdi if you look sectrally don't have a positive effect on productivity because there are both the effects of volatility but also they don't seem to go into the most dynamic sectors or to the companies that expand productivity it was quite a big shock because we expected at least fdi to have net positive effects but certainly the the short-term capital flows have deeply problematic effects the fourth point is that we have a useful as of course antonio showed but two small imf lending facilities um that have had some improvements as of course antonio pointed out I would be a little bit less enthusiastic because in in in Europe the imf has been really really very tough um I think one of the problems is that they don't seem to learn from the experiences I remember talking to quite a senior person in the in the check central bank and she said to me why didn't the imf tell us all this they told us all the good things that would happen if we liberalized the capital account liberalized the financial but they didn't say the crisis this was the time of the east Asian crisis could happen so why doesn't the imf honestly explain the lesson I think they have come a bit better but um as I will mention also later but the key problems are that the facilities are too small even though they have been improved and the level of conditionality is still too high and there's not enough automatic lending like the swap lines that cos antonio referred to in face of purely external major shocks like commodity price shocks uh for for poor countries and capital account shocks for the middle income countries and finally as cos antonio explained there is a lack of an international debt workout mechanism so um I would like to make one once with cos antonio's book because he does it and rightly from the perspective of developing countries um and it's very important to look at this through this lens but I think one of the interesting points that emerged from the 2000 2009 2007 2009 crisis is that these problems are also very important in the developed countries in the so-called mature economies because the crisis in the united states led to an estimated loss of output of about according to the fed 1.6 trillion dollars in the market in the financial market which is the deepest one in the world and supposedly the best so the flaws that we see that we saw so clearly in the emerging economies in latin america in east asia are also in different manifestations very deeply intrinsic in the developed countries particularly when they have deregulated finance and not regulated properly and I think this is in a way I mean it's a it was a terrible crisis but it may be good perhaps for international monetary and financial reform because there is a joint interest it's not just south north but it's also an interest of all governments and presumably all the real economy to to reform a system which doesn't work it doesn't work for for us in the third world but it doesn't work for the first world either um so uh and I want to talk a little bit more about the the aspect of managing the capital account on which I've worked quite a lot over the years and particularly uh with cos Antonio uh as I said the book is very nice on that going back very relevantly in this case to the creation of Bretton Woods and the way that people then looked at it including for example the UK and the US treasury on the issue of capital account management and capital controls and both Keynes and White the founders of the Bretton Woods system were both very much in favor of allowing of restricting the ability of countries to put barriers on trade but allowing them to put barriers on the capital account um and this was um a very important and very clear in the articles of agreement and cos Antonio already told the story about how uh the particularly the Americans and the British wanted to to continue liberalizing also the capital account and it was the eloquence of cos Antonio that stopped them doing it plus the East Asia financial crisis yeah because this meeting was just as the East Asian crisis was beginning to happen so the timing that the Americans and the IMF chose was very bad but also of course reinforced by by by the clarity with which developing countries defended their position so um yeah I'll be very brief now so the key point is that since since the global financial crisis the IMF has changed this position and it has now what is called its institutional view which says that it's okay to use capital account management it has some problems first it doesn't include the source countries so I think to have a proper system of capital account management you need also to have regulations in the source countries as indeed Keynes argued and as some papers in the IMF like Gauche et al 2014 actually shows the coordination of capital account management between source and deficit countries would increase the cost effectiveness of such measures secondly I think there's a risk that this new position of the IMF could could be a little bit undermined for example by the position of the US government but also a shift to the right in countries like Brazil and finally there is an inconsistency I won't go into that but because it takes a bit long there's an inconsistency between this better IMF position and what is done through the trade mechanism through the WTO and particularly through the bilateral investment treaties and the trade the trade bilateral and regional treaties which force countries particularly the US force countries to liberalize the capital account so you had for example the IMF praising Chilean capital controls which have been very effective and on the same time when Chile was signing a free trade agreement with the United States the US Treasury bullied Chile to seriously limit their so widely praised capital account management so you have this inconsistency and there is a need for a sort of adjournamento of the rules of the WTO and a revision of all these bilateral investment and trade treaties and our colleague Kevin Gallagher with whom we did another book also has done a lot of serious work in this area and a reversal for example on the fact that when there is an American bank or a European bank can sue a developing country a bank a private company can sue a developing country and take it to a private court to decide whether that country should have a capital account liberalization which is of course absurd and very much undermining of national policy autonomy so to finalize I think this this is a right moment where we are very clear that the world needs a new international financial and monetary system and unfortunately the political realities is moving against a more managed approach to the world economy a sort of stepping back from the good aspects of globalization but maybe these things change and I was very encouraged when and this is a little bit of political publicity when John McDonnell said that he's thinking of calling a conference of a new Bretton Woods so maybe maybe we will have some some light at the end of the tunnel but but we have of course a very clear need thank you very much thank you so much Stephanie this was also very very thoughtful and inspiring and I fear I won't be able to compete with this now and also we were running a little bit late but but I want to make three points first one as Stephanie just said in her last sentence there is a very urgent need for greater international monetary cooperation which and I think we were not really seeing the discussion we need on this topic at this moment there's of course an awful lot of discussion about the global trade war but this is an issue that is actually very closely related to the different flaws that Jose Antonio addressed in his lecture today so it's about current account imbalances trade imbalances are very directly related to the need of countries to basically accumulate foreign exchange reserves and so we have a dollar-centered global system so everyone needs to build up dollars to basically self-insure against crisis and so there are some very fundamental problems that may not obviously relate to the current issues that are being discussed but we need to address them and second point I want to make is relating to the issue of the kind of elite multilateralism that Jose Antonio highlighted and in particular to the IMF stigma so the IMF is an incredibly important institution but it has a bit of a checkered past to put positively and so there has been mentioning of the various emerging market crisis of the 1990s and a very clear lesson from these emerging market crisis was that we need to do everything for developing emerging countries was we need to do everything to avoid such crisis from reoccurring and there was a lot of unhappiness across Latin America, African economies and of course also the Asian economies with how the IMF has handled the crisis so a lot of countries reached the conclusion we need to self-insure we cannot rely on the defunct global system we cannot rely on the IMF so the implication was that countries have started to try to build up as much foreign exchange reserves as possible and how you do that of course you have to build up a current account surplus so that's where part of the issue with kind of trading balances come from it's not the only reason but essentially there has been a very very strong motivation for countries to somehow build their first line of defence the IMF has changed quite a bit so you mentioned the changing of the IMF's position regarding capital account management so this is viewed much more favourably in Washington now but for the time being there is still a very strong feeling that the IMF is essentially an institution dominated by the Europeans and the Americans and in the 2008-2009 crisis a lot of people were quite cynical across developing countries and they noted that okay now the advanced countries are hit and the recommendations coming out of Washington are very different in fact they were more or less the opposite of what Asian countries were told and I would argue that much of that changed or change of tone in policy recommendations was linked to some learning effects in Washington but still there is a genuine mistrust and so the issue of changing IMF governance is really a very crucial one to regain the trust of member countries and the European dominance at the IMF is very much epitomised by the fact that of course always a European and often a French man or French woman has been leading the IMF and there's of course a lot of other things that need to change but it would actually be I think a very important symbolic change if at some point we get a leader for the IMF from the developing or emerging country and this may be wishful sinking and Jose Antonio has pointed out that his struggle to take over the world bank has not been successful but I think this is a very symbolic change that is needed and hopefully it will come at some point. As a last point I just want to briefly touch on the role of regional corporation and regional financial arrangements which is a bit of a pet topic by Jose Antonio and myself. So a second lesson from the emerging market crisis and the Asian crisis in particular was that of course we have to build our first line of defence with domestic reserve accumulation but also that we should try to build up some regional defence mechanisms and in Asia even during the Asian crisis there were attempts to develop a regional monetary fund that was shot down at the time but since then the so-called Chiang Mai initiative has been developed, it has increased and so it's actually a meaningful vehicle now and as Jose Antonio showed there's actually now a quite large number of different regional financing arrangements of different size and roles but this is actually a quite important change in the international monetary landscape. The problem right now is that only some of these arrangements are really properly working. So Jose Antonio mentioned Flar as a very positive example, a very small one but a very positive example but the Chiang Mai initiative in the East Asian region for example is not working properly partly because it still has a link with IMF lending so it can only be activated if the IMF is involved which of course then is again kind of hindered by this IMF stigma but in Europe we have arguably a very powerful regional arrangement now with the European stability mechanism which has a firepower of 500 billion euro which is much larger than the IMF not long ago and arguably Europe now having established this one is kind of exiting this IMF system because the past experience during the the euro crisis with the IMF was not exactly very positive even though one could actually say that partly the unhappiness for example from the German side comes from the fact that the IMF was brought in as a kind of tough guy to to discipline the various problem countries but it was not tough enough at least for German standards so the IMF was kind of rather seen as a kind of irritating factor in between but arguably now the Europeans have established their own mechanism so and this opens an important question how are we coordinating these different levels we have kind of the domestic we have the regional we have the international with the IMF and it's good to have all these different levels but it can be very messy because if crisis arise who's responsible for what you know who's acting at what time who is kind of what are the financing conditions because not having proper coordination between these institutions can actually make crisis even more difficult to resolve and also more costly to resolve so if we have some regional organizations which extend some lifeline to countries that really need to take some tough actions now then actually things can become even worse so that is I think a very crucial area that needs further work there has been some some attempts at the IMF and regional organizations to address this but I think we need much more progress and of course Jose Antonio's book is again a very good source of ideas for that I could go on because there are so many interesting things that you brought up but I will shut up here and instead we'll open the floor we do have some microphones so yeah and so we'll take questions and we'll start with this gentleman and I'll bring the mic and thank you and if you could please identify yourself and and put a short question George Perendia, George Perendia, independent consultant basically in microeconomics the the question is when Antonio says I am not a member of this institution called international monetary firm is this I Antonio or is it I Antonio as a co-director of the bank of the public Colombia which I presume is a central bank or is it I Antonio as a representative of Colombia as a state because this was supposed to be a discussion about central banking the central banking has been only mentioned in a passing rather than as a as a major part of the subject now what is the role of central banks in this context should they be represented in IMF or should it be actually a representative of the state democrat democratically elected government so we will be collecting hi ddanae cyrgypwlu chief economist Amfiff thank you very much both for your remarks very interesting presentation I wanted to pick up on your last slides on the global financial safety net and the multi-layer architecture that you advocated also building on what ule was saying about the regional financing arrangements and if you could expand a little bit on the reasons why you think these should be developed particularly do you see them as complementary to the IMF or as taking over the IMF and if the lateral is that because of the issues you mentioned about the IMF and the stigma attached to it what do you think of things like the short-term liquidity swap facility that the IMF has been debating but has been shot down by Germany and others and a lot of the shocks that hit different economies tend to be regional so if we go down the route of these regional financing arrangements how is that then an issue if if there are shocks that hit the region as a whole and different economies want to access the fund at the same time do you not still need a global body that that cancels these out and then if I may a question to Stephanie as well on the point that you mentioned about this is symmetry between house surplus and deficit countries have adjusted the fact that we have the excessive deficit procedure but not a surplus equivalent in the euro area how do you get a country like Germany on the Netherlands that you mentioned adjust when from a monitor from their position in a monetary union of course it makes sense to address these imbalances but when you look at their economies in isolation you have economies like Germany that have aging populations that are very close to full employment so from a fiscal management perspective it makes sense for them to build up surpluses so thank you thank you my name is glenn hogarth from the bank of england I think quite a few people would agree with lots what's been said in terms of the problems I think as Stephanie mentioned the real concern is political will at the moment so the non-system is becoming more of a non-system in the next few years it looks like so I'd be interested to know what you think are the most plausible changes that can be made in the next few years out of your range of suggestions given the various constraints on current accounts surplus countries will not adjust advanced countries will not change their monetary policy swap lines two years ago was stopped by us in Germany us has a veto at the IMF so anything radical at the IMF cannot be changed so what is it that you think can be changed okay let me let me answer and actually let me reflect actually some of the comments by Stephanie and Ulrich in case of Ulrich I'll refer also to the to the show the multi-layer architecture but there which there was one question actually I didn't present the but in the slide there was this idea of the three basic problems of the global research system which is the asymmetric adjustment problem which was the say King's obsession in his writings before the the IMF negotiations so we saw that in some previous writings I call it the anti-Kings and bias of the system so the fact that surplus countries do not adjust they have to adjust then the second is the triffin dilemma which nobody talked about the not even in my presentation which is the fact of the problem generated by adjustment of the major country usually the global reserve which has of course been a very difficult issue at some state sometimes for the United States with the US dollar and now for example talking about a non-system you know when you know the major country is running huge fiscal deficits you know it's a question park of whether that's that factor is not generating a new instability and and finally the inequity so this which is the self-insurance the fact that you know developing countries in particular you know have to accumulate foreign exchange reserves as an insurance which was a basic lessons of the developing country crisis not only of the east Asian crisis after that you see a very clear increase in reserves from all developing countries okay so so I think those those are you know important topics and Stephanie said you know the the first is certainly a problem of so developed countries I mean the symmetric adjustment problem is a certainly a central European problem and the way it has been solved is actually as I show in the graph by forcing deficit countries to adjust which means that the European Union as a group became a huge surplus economy in the world because the surplus economy is not only Germany and and the Netherlands have not reduced their surpluses lesson now on the regional cooperation which there was this also a question let me you know should it be should all this regional and some regional layers be complementary or competitive I think let them be both actually my my favorite part which is mine the the one from my regional the world the the latin-american reserve has never done anything with the IMF so all lending has been done by by the Flar by itself with no complementary no program with the IMF and I as I point out in the book and this is widely agreed the Chiang Mai agreement has not worked because of that tie with the with the IMF that you have beyond certain level you have to have an IMF program the result of the East Asia crisis and the boy wants to use the Chiang Mai arrangement okay so in in my view the you know let them work anyway the regional system wants to them to work that's actually how the multilateral development banking system works each institution is only some sometimes it cooperates sometimes it doesn't cooperate actually compete competition is good so as as I used to say when I was finance minister we have the luxury of having three multilateral development banks then to us the world bank interamerican development bank and the latin-american development bank so three banks you know better than those countries that have only one right so competition is good uh so this is so I of course the they they sometimes should work as a system uh there has to be some coordination but for example I think and Stefan is right uh that the uh you know the IMF played uh I mean the the fact that in the in the european adjustment problems that there was a mix of european and and and IMF money didn't help it was not a good solution probably on different for different reasons for different for the germans and different reasons for the adjusting countries anyway so so I I said the best system is probably not necessarily not you don't necessarily tie your problems with the IMF I think that's the best system if you want maybe but that's your problem let each one choose let's say um anyway um let me also excuse me on the question of membership I really was talking about the elite multilateralism I would refer to the g20 and it's my country of course I am a Colombian citizen that's my only citizenship I have I have no choice in any other no no no in the g20 actually well it has a state there are the members right and then and then there are ministerial meetings today in the IMF in my view it should be the governments uh the states and the state chooses who represents the country uh so for example in my in in our case in Colombia the central bank is the the voice in the IMF but the uh and the government is the voice the minister of finance in the uh in in the world bank but they you know sometimes the minister of finance speaks in the IMF so it's no no no strong principle but you know in the IMF in principle should be the work the central banks uh that have the the the voice but sometimes are ministers so it's okay I mean I have no problem with now what can be done and and I think out of the of my reforms for example there was also a question of the short term facility I think that there is a possibility of of designing a more flexible facility uh even a you know flexible contingency facility uh as I said the for me the best model are the swap arrangements uh there is a basic mechanism used among developed countries uh so I think something that is closer to the swap arrangement is good by the way the the flexible trade line that Colombia uses is a good one I think I have no idea why other countries refuse to to apply to for it I think it's a good line but the more a shorter facility will be better a stronger use of SDRs is something that is easy to I think it should be easy to agree because that's a that's a mechanism I actually will solve one of the major problems of the IMF which is to get money for its lending program which is a recurrent problem with the IMF if you used your own way of issuing money as a way of of making some financing you solved that problem actually you didn't even you don't even need to have quotas because because you can actually give them and the quotas can be the the money that the IMF issues the SDRs so I think that should be um it should be a easier mechanism on the capital account and solving the I think keeping the institutional view is is very important and probably the OECD should try to copy the the institutional view right and try to go against the institutional view now that the OECD is discussing this topic again and actually the institutional view one of the good things that it has is at you know at the end it recommends countries for example through bilateral agreements to have agreements that that are consistent with the IMF view so that allow you know you know some kind of capital account management on the certain circumstances so I think that's also something on that I am a bit I don't think there is there are many possibilities to go after the agreement of 2014 that had this enhanced let's say market mechanism but and finally I what one thing that can be done is actually to keep working on more regional arrangements that's something that is actually uh it will improve the system and and it has no negative perspectives as far as I can see I mean the point is that countries in the region have to work on creating the institutions and try to make them more you know operative excellent questions I think the first one was about Germany how you can convince a prosperous Germany with quite full employment to have an expansion I think that's a really difficult but very important question I mean if you look at carefully at you know infrastructure in Germany like digital infrastructure you know when you try and use the internet in Germany it's not very good so there is a quite a large infrastructure deficit in Germany and some people have low wages I mean overall the standard of living is quite high but there is quite a big group of people who have low wages so you could build a case if you change the sort of mindset that Germany would actually prosper from having a more expansionary policy both in terms of public investment which is actually negative it wants to take depreciation out and higher incomes that would increase welfare for Germans but it would also expand aggregate demand in in deficit countries you know if you increase the wages of a German worker and they go for a longer holiday in Greece you know it's a it's a win-win to put it simply and I would love to join them um now in in it's also a very interesting but difficult question of what is most feasible I mean I think one of the interesting things that of course Antonio mentioned uh and this is perhaps more important in the case of development banks rather than I than liquidity facility provision is the creation by the south or particularly by China led institutions of parallel institutions and and the case of the create massive creation of AIIB with a hundred billion dollars of capital involving the developed countries but dominated basically by the emerging economies and especially China has actually catalyzed quite a lot of change I think in the world bank and the world bank suddenly discovered they had to do more infrastructure which had been kind of refusing to do and which was one of the reasons I think why the Chinese and others created this institution so I think having precisely is more decentralized financial system having more countries from the south taking a role having this kind of competitions because Antonio says is I think healthy because it will also push the more developed countries to make bigger efforts through institutions like the world bank and the IMF and and in fact they may you know for example if if the world bank and the IMF had done more and if they had given more voice in the boards of the institutions to developing countries maybe the Chinese wouldn't have even done this AIIB so I think it's in the interest of developed countries to to to do more to change the voice to show that these institutions are more flexible so that you have a more collaborative approach I agree that SDRs should be actually easy technically to issue and politically it wouldn't really harm anybody it's not really inflationary as the Germans say and the other thing that I think would be good is to have larger IMF facilities and more flexible particularly for the poor countries I mean the poor countries don't have hardly any condition low conditional automatic facility if they're hit by terms of trade shop if the price of their main commodity falls or the price of oil like the import oil goes up you know they have to have this very painful adjustment but in the past actually the IMF had a very good facility the compensatory financing facility every time I proposed they should expand it they would diminish it every time I wrote papers saying that they should lower the conditionality they increased it so I'm not a very good prophet but I think I think you know if you care for really poor people this is a very good way of of protecting poor people in in in poor countries uh to to these external shocks yeah well we have a couple of questions and I like to so you go first and and could you put it very briefly please thank you um I want to ask for both of you Professor Stephanie and Professor Jose Antonio you call for more regulation of cross-border capital flows so what can be done in terms of to manage this like road of shadow banking and in your perspective what could be the consequences of the growth of shadow banking in the developing work and secondly if you can provide us your thoughts about the international sorry the monitor the argentina monetary crisis and the the role of the international monetary fund when you call for eliminated stigma of of the fund and we can see that there are kind of proposals for more austerity there thank you one question per person you next many thanks for the session so my question is what is the bottom line effect of the american china trade war for the international financial system for both developed and developing countries thanks how to get out from this non-system called non-system of uh sort of counter-secretary liquidity management at global level at the moment in the end who who has rendered last result it's because of system us dollar centered judicial system i mean basically it is a federal reserve which has seems to be liquidity is in the end related to us monetary policy and you mentioned and your book mentioned that more active use of sdr is a very important source and you know it doesn't depend on individual countries willingness to put the liquidity into system uh what is it technical problem still there or it's political question completely and the federal you know regional route will really solve that sort of problem or it had to be changed at global level in such a way that counter-secretary liquidity management in that much better way to not push countries to individual thank you very much and the very final question very very brief please thank you my name is ali i'm regular here but this is the third one i attend on economics and and finance my question becomes more or less standing order is about disparity of the exchange rates uh vis-à-vis the dollar of of the world i'm mainly mesopotamia by virtue of my origins that iraqi dinar has devalued four thousand fold times so you multiply that by a hundred and you get the answer and in the question of zimbabwe one i was even more surprised that their rate has devalued by hundreds of thousands towards millions i couldn't believe that i haven't been convinced by economists why this is so why we can't delete these some of these zeros as tech he did several years ago so now a dollar instead of six techish leaders would have been six million years can you can you ask your question please that is the question why the disparity in the exchange rates ridiculous one of these countries which zimbabwe still has gold and precious metals we still have in mesopotamia black gold and other resources why is this disparity convinced me this is the third one uh as economists i don't know i don't understand economics or what but why should it be from dinar used to be more than three dollars now a dollar is a thousand two hundred also uh dinars please thank you so we do have a bit of a time problem because it's four o'clock now so it's over but there's no one waiting outside so we will have a few minutes but really only a few minutes to to give uh for for santo on your and also Stephanie to give a few uh final remarks and you get two minutes each that's challenging no on on two questions i would say that's those are domestic problems uh the issue shadow banking shadow banking is a domestic regulatory problem i mean uh i don't think the international community should uh you know i mean should of course support countries to eliminate shadow banking that's a domestic neutrality and the exchange rate issues that i mean all the cases that you mentioned are major domestic imbalances so you have to eliminate domestic imbalances and you have hyperinflation uh which is the case of simbawel let's say or or now in iswela in my region uh you know that's a domestic problem we you know the international community should of course support uh the stabilization of those countries but that's uh that's about the that the the china u s trade war um a i mean i think the major international effect on the issue that we're talking about is the the depreciation of the or the remedy uh that it has generated uh which is of course now they look at by the u s as a potential uh unfair competition uh anyway so the um now the on uh my chico questions are actually on the issue what to do i mean going back to that issue um let me let me really say that my perspective in this book is is is uh is as i call it evolutionary uh so try to see how you improve things uh i i'm probably piece by piece i'm not sure uh let's say it's a competitive was it's possible but uh uh it will be very difficult but you can actually discuss issue by issue and try to improve that uh and i mentioned several cases i mean in capital account in uh in uh in let's say in building regional institutions etc and also in the um let's say in this lender of last resort which is quasi lender of last resort role of the imf and i think again building a better facilities more automatic facilities something again closer to the swap arrangements uh it's probably a way to go uh it works well among developed countries uh in developing countries it will not work because uh we we have no reserve currencies uh but you know if you develop lines in the imf which are working a bit more flexibly uh and automatically uh i think that will be magnificent and how do you find out them with sdr that's my proposal uh very quickly uh on shadow banking and the need to regulate it i think it starts as a domestic um problem as of course antonysus but it also spreads internationally because you have for example all these non-deliverable forwards where hedge funds and banks take positions on the exchange rate of emerging economies and of course they can regulate and countries like south korea have done it i don't know how successfully but they have they have tried but i think a certain international co-ordination of the regulation of shadow banking is very important there's a group of quite radical academics who have signed a letter recently actually accusing the world bank of encouraging shadow banking in developing countries because they say that the world bank in this thing of involving the private sector which on the whole i think is is is a good thing but they are doing it in a way to precisely encourage all these very speculative mechanisms and all these complicated leverage institutions and that instead of actually regulating shadow banking they're encouraging it it seems a bit exaggerated but i think there is there is some some truth in it um and finally on this us trade a problem position i think that the problem is that um the measures being taken by the trade by the trump administration in particular pose a lot of risks to the international financial system because we already have all these financial vulnerabilities you know too much corporate debt too much debt in china and so on but all this can be accentuated as as has happened in the 30s by by growth of protectionism if it spreads i mean luckily it's not spread so much but if the conflict becomes very very big i think it can be you know it could be a potential risk of a trigger for an international financial crisis and a particular danger which i i think trump hasn't even thought about it's it's a sort of nuclear weapons i'm not sure the chinese would do it but i mean they hold a lot of u.s treasury bills so if if they're really pushed into a corner by by the americans on trade you know they could they could sell u.s treasure bills it's not in their interest because that would lower the price of u.s treasury bills but but it is something which shows you again the many connections between finance and trade and so it's actually a very kind of negative world of doing that rather than you know improving the trade system and more fundamentally reforming the international financial system thank you steffany is that a rather gloomy ending um no but so as a scholar i can say one thing that that in a way dealing with these problems is in a way nice for me or for us will never run out of problems to deal with these um because these problems are not not not going to be be be not going to be solved anytime soon but uh but i think to go back to the point i made earlier on i think um Jose Antonio has not only shown uh a lot of the problems or a lot of the problems but also addressed a lot of very sensible potential solutions and uh i think we're all aware that you know we're not going to see the big overhaul of the international monetary system anytime soon um but there's certainly a lot of areas where we need to keep pushing and and scholars need to provide uh good workable ideas and of course policy makers have to see what they can can implement um and so it's very encouraging to have uh a policy maker like you who is very much thinking about these issues and uh i'd like to thank you and also steffany very very much for joining us today and giving these wonderful uh uh thoughts sharing them with us uh thank you and uh let's all i don't think myself so so let's give a hand to our wonderful speakers